BMO GAM's Balmer: Now is not the time to take heroic calls on large equity holdings

Last month the US yield curve inverted, with the yield on 10-year Treasury bonds dipping beneath the yield on 3-month Treasury bills.

History has demonstrated that a yield curve inversion at these specific points has been a good predictor of future recessions. As the US economy is currently driving global growth, a recession in the US would have serious global implications.    Is it therefore time to sell out of equities and run for the relative safety of government bonds or cash? We do not think so, not just yet in any case. Looking more closely at the efficacy of this predictor and its timeliness leads us to a more cautious conclusion. What does the yield curve inversion really mean for investors? According ...